United States: CFPB Evaluates Remittance Rule

In a report to Congress, the Consumer Financial Protection
Bureau ("CFPB") evaluated a 2013 rule requiring remittance
transfer providers to make certain disclosures to consumers
regarding costs, fees and other information prior to purchase.
Remittance transfer providers generally are stand-alone licensed
money services businesses (which conducted 95.6 percent of all
remittance transfers in 2017), as well as banks and other insured
depository institutions.

Dodd-Frank Act Section 919 amended the
Electronic Fund Transfer Act to establish a comprehensive
system of consumer protection for remittance transfers. The rule
implemented these new consumer protections, and also set forth
cancellation and refund rights for consumers. The purpose of the
CFPB report - titled the "Remittance Rule Assessment
Report" - was to evaluate the effectiveness of the rule in
meeting CFPB objectives.

The CFPB's findings suggest that after the rule's
effective date, more consumers received timely information to make
informed decisions when sending remittance transfers.

Key findings include:

new technologies, such as mobile
phones, have changed the marketplace, which has made it more
difficult to discern the rule's effects;

the volume of remittance transfers by
money services businesses was increasing prior to the effective
date of the rule and, afterward, continued to increase at the same
or a higher rate (many factors other than the rule might have
affected consumer demand for remittance transfers);

the number of banks transferring over
100 remittances has been steady or increasing since 2014;

the number of credit unions that
reported offering remittance transfers went up in the two years
after the rule took effect (comparable data are not available for
banks prior to the rule coming into effect);

the average price of remittances was
declining before the rule took effect and has continued to do
so;

the CFPB's examinations have
found "mixed levels" of rule compliance across the
industry, including "both individual violations [at certain
institutions] and wholesale failures to comply at others," but
the CFPB has not filed any enforcement actions against institutions
as of the date of the report; and

remittance transfer providers
continue to incur compliance costs on top of one-time costs.

In addition, the CFPB found that:

in a survey of remittance transfer
consumers that was conducted by a consumer advocacy group, 59
percent of those surveyed remembered that the rule-required
disclosures included information about fees, and 63 percent
recalled that the disclosures included an exchange rate;

available data sources reveal that
consumers cancel between 0.3 and 4.5 percent of remittance
transfers;

consumers report errors under the
rule's provisions for between 0.5 and 1.9 percent of remittance
transfers;

around one-fourth of asserted errors
are found to be provider errors, as defined by the rule (available
evidence points out that most asserted errors are due to consumer
mistakes or other issues); and

the percentage of banks using the
"temporary exception" (created to allow insured
institutions to provide estimated disclosures in certain
circumstances), which expires on July 21, 2020, fell since the rule
took effect.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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The FTC has long asserted it has the authority to bring actions in federal court to obtain injunctive relief and equitable monetary remedies (e.g. disgorgement, consumer redress) for unfair and deceptive practices.

Throughout law school I worked with the Suspension Representation Project (SRP) as an advocate in New York City public school suspension hearings, and am now helping to coordinate a new project at Proskauer through our partnership with SRP and The Center for Popular Democracy.

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